SCHIMDTCO

Background
Schmidt Co, a family owned firm is in Automobile parts

distribution business. Annual turnover $ 40 Million. 10,000 SKUs distributed on an average to 1000 different destination. Shipping 20 million pieces a year. Volume & Complexity of business made information system critical to the success of business.

Present Info System

18 year old unreliable and obsolete system.

Increasingly unable to process information in efficient

manner prompting the owners to replace the same with a state of art system. The current system essentially an inventory management system. The vendor of the original software was out of business and subsequently firm used an independent consultant to customize and enhance the system. Severe Limitations in two crucial functions: Inventory Management & Purchasing. Systems for accounting and other aspects operated

New System
The new system expected to integrate all information

system within the company and assist in better control of inventory. Decision to implement an ERP (Enterprise Requirement Planning) system. The new system was proposed by a cross functional team of 8 managers. The new system would have the following Modules: Warehousing, Inventory, Accounting, Purchasing, Sales & Customer Relationship Management. Firm aimed reduction in overall inventory and improve service levels Automating of functions would result in reduction of staff.

New Project
The firm DTech System chosen after 3 months of survey.

DTech system chosen because of it superior functionality in

Warehousing and Inventory Management. DTech new entrant in US market. Till date only 15 ERP systems deployed in US compared to runner up vendor (US based) which had installed several hundred system. System cost by both vendors was same ($ 400,000).

Current State of Implementation

Implementation commenced in December , PDC 6

months. Old system to continue operations in the interim. 10 member team to manage implementation internally. DTech 3 person to handle the technical side. Conference Room Pilot to test the effectiveness of the system with hypothetical data. Concurrently IT manager to design reports required to be generated by the system. Validation of system to take place with real data.

What is his decision problem (Give at least three alternative definitions)

Whether to implement ERP uncertainties/ reliability of

the system and cost overrun. Integration cost vis-a-vis benefits. Change Management implementation of ERP / Changes in leadership during project implementation (HR Issues) Poor/ prolonged implementation process, leading some in the firm to question the decision of vendor selection at the same time exposing the lack of in house expertise.

Present Status:
Expenditure of $ 600,000 incurred. Presently $ 50,000 over budget and 3 months behind

schedule. Implementation team trained extensively. Vendor defaulted in provision of quality project management. Firms IT Manager inability to convert existing data and setting up of reports further delaying the project. The IT consultant quit the firm which further compounded the problem.

Why is the decision facing John Schmidt a difficult one ?

Current state of things not very encouraging.

System implementation not progressing as envisaged.

Cost over runs further burdening the firm. Requirement of full time project manager and IT person for

data conversion, infrastructure improvement and Report writing likely to add to the fixed cost of the firm. John being advised to dump DTech resultant fall out the loss of some initial payment made. Further delay in implementation of ERP likely if new vendor appointed.

What should be his Objective?

To address the issues relating to troubles in other areas of

IT consequent to unexpected quitting of the IT Consultant. To manage the Project cost over run and reduce execution and implementation time. To get greater commitment from the ERP implementation firm Dtech Improve the functioning of the internal team by reviewing the progress and laying down timelines for sub tasks within the ERP implementation.

Alternative & Consequences?

Change the Vendor
Project will be delayed further, forego initial payment & start

from scratch.
Hire a full time project manager and IT person.
Will improve the implementation and expedite deployment of

the system. Likely to add to fixed cost.

To implement ERP system in Phases commencing with

Inventory and Purchasing Management.

Scope being limited, easier to implement & manage. Further implementation could be planned based on the

effectiveness.
David to replace John as Project Manager and ERP

implementation officer.
Davids experience & background makes him an ideal

choice.

What should he decide ? Why?

David should replace John as Project Manager. A new IT person should be hired. To implement ERP system in Phases commencing

with Inventory and Purchasing Management. Inject more professionalism into the proceedings by selecting the right people to take part in the Implementation process. Get in touch with other companies who have used the services of DTech to see how the systems are working. Stay with DTech and demand greater response from the firm and give them a time frame to fix problems from their side failing which new firm